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Breakfast briefing: Tuesday, June 30


Market wrap: US stocks fell sharply in heavy trading on Monday and the S&P 500 and the Dow had their worst day since October after a collapse in Greek bailout talks intensified fears that the country could be the first to exit the euro zone  US investors also worried about Puerto Rico's debt problems and a bear market in China the day before quarter-end and ahead of Thursday's U.S. jobs report and the long weekend for U.S. Independence Day. - Reuters

The DJIA fell 350.33 points, or 1.95%, to 17,596.35, the S&P 500 lost 43.85 points, or 2.09%, to 2,057.64 and the Nasdaq dropped 122.04 points, or 2.4%, to 4,958.47.

Forex summary

The ringgit fell to a 10-year low in cautious trading following concerns over Greece's debt default, dealers said. - Bernama

*The local currency was down 0.43% to 3.7843 per US$

*It rose 0.34% to 4.2073 per euro

*Down 0.14% to 5.9438 to the pound sterling

*0.08% up to 2.8034 per Singapore dollar

*0.21% higher to 2.8979 per Aussie

*Up 0.02% to 3.0872 per 100 yen

Energy

Crude futures hit 3-week lows on Monday as Greece shut its banks and imposed capital controls, causing widespread risk aversion, while Iran looked likely to extend nuclear negotiations with the West to export more of its oil into an oversupplied market. Brent crude futures settled down US$1.25, or almost 2%, at US$62.01 a barrel, its weakest finish since June 5. - Reuters

Top foreign stories

Greeks rally: Tens of thousands of Greeks rallied on Monday to back their leftwing government's rejection of a tough international bailout after a clash with foreign lenders pushed Greece close to financial chaos and forced a shutdown of its banking system. With a popular referendum on the bailout planned for Sunday, Prime Minister Alexis Tsipras put his own position on the line, saying he would respect the result of the vote but would not lead a government to administer "austerity in perpetuity." - Reuters

S&P cuts Greece rating on referendum call: Standard & Poor's downgraded Greece's credit rating deeper into junk territory on Monday, saying the government's call for a referendum on creditor proposals brought it closer to default. "We interpret Greece's decision to hold a referendum on official creditors' loan proposals as a further indication that the Tsipras government will prioritize domestic politics over financial and economic stability, commercial debt payments, and eurozone membership," said S&P. It cut Greece's already deeply junk-level rating to 'CCC-' from 'CCC'. - AFP

China's premier offers Europe investment, wants Greece in eurozone: China used an EU summit on Monday to promise to invest in the bloc's new infrastructure fund, call for a global climate deal and warn it did not want to see Greece leave the eurozone. Premier Li Keqiang, in Europe on a day when financial markets took fright that Greece might leave the euro, said China and the world wanted to see Athens remain in the currency area and that China would continue to buy eurozone debt. - Reuters

Second-quarter M&A close to record amid mega deals: Mergers and acquisitions (M&A) worldwide in the second quarter of 2015 almost matched the record set in the second quarter of 2007, according to preliminary Thomson Reuters data, as big companies turned to deals to boost their market share. Low interest rates and stronger confidence among chief executives have led to a steady rise in M&A activity in the last two years to close to pre-2008 financial crisis levels. The second quarter of 2015, however, stands out for the number of mega deals that were clinched or attempted. - Reuters

Puerto Rico insolvent, running out of cash: Puerto Rico is "insolvent" and will soon run out of cash, according to a newly appointed adviser to the commonwealth who was the judge who oversaw the historic bankruptcy of Detroit. Puerto Rico "urgently needs our help," Steven Rhodes, who retired as a US Bankruptcy Court judge earlier this year and has been retained by Puerto Rico to help solve its problems. He stressed that bankruptcy would not be a "bailout". Rhodes said: "It can no longer pay its debts, it will soon run out of cash to operate, its residents and businesses will suffer."

Top local stories

Greece fallout unlikely to affect Malaysia: The fallout from Greece’s possible exit from the European Union following its debt crisis is unlikely to have a contagion effect on the Malaysian economy for now. But the concern is more on Fitch’s credit rating on Malaysia that could impact the ringgit, which is seeing minimal effects from the Greece problem. - StarBiz

1MDB to reduce debt by RM16bil on completion of IPIC deal:
1Malaysia Development Bhd (1MDB) said that its debt would be reduced by RM16bil when it completes the commercial negotiations with Abu Dhabi’s International Petroleum Investment Co (IPIC). It clarified that neither the Finance Ministry, nor the Government, has provided guarantees for the recent transaction between 1MDB and IPIC. - StarBiz

Multi-Usage shareholders reject directors’ re-election, fees: The courtroom battle will only start in August, but the shareholders of Multi-Usage Holdings Bhd (MUH) have already decided to remove three of the five directors. At the property developer’s AGM in Penang, the directors who were up for re-election were voted out by most of the shareholders. Besides chairman Abd Aziz Mat, the other directors are Cheah Chin Huat and Ang Hwei Chyn. Shareholders holding 86.89% of voting shares also rejected the payment of directors’ fees amounting to RM119,250 for the year ended Dec 31, 2014. - StarBiz

Yinson focuses on O&G: The founding shareholders of Yinson Holding Bhd have made an offer to buy the company’s logistics and trading businesses for RM228mil, allowing Yinson to focus on its oil and gas (O&G) venture. Group executive chairman, Lim Han Weng said proceeds from the exercise would be used to fund its expansion in the O&G industry. - StarBiz

I-Bhd confident of hitting RM500mil sales target: I-Bhd, the master developer of i-City, is confident of sustaining double-digit sales growth to nudge it towards its target of RM500mil in annual revenues in three years.The revenue growth would come mainly from its property development segment. Deputy chairman Datuk Eu Hong Chew pointed out that the company’s property development hit a revenue of RM201mil for 2014, which was more than double the RM95mil recorded in the previous year. - StarBiz

Potential RM700mil boost for YTL Power: YTL Power International Bhd ’s potential RM700mil windfall from Petroliam Nasional Bhd (Petronas) for overpaid gas will boost its cash balance, but is not a strong re-rating catalyst, said analysts. Kenanga Research said the power purchase agreement extension of two YTL Power’s plants was more important, considering the PPA for the Paka plant was expiring this September and the Pasir Gudang plant early next year. However, it said there was no news of the PPA extension for the first-generation independent power producers. - StarBiz

Scientex set to expand land bank in Johor: Scientex Bhd has proposed to buy 326 acres of freehold land in Pulai, Johor, for RM219mil cash via its unit to expand the group’s land bank in the state. In its filings with Bursa Malaysia, the packaging manufacturer said its wholly owned subsidiary, Scientex Quatari Sdn Bhd, had entered into conditional sale and purchase agreements with Bukit Gambir Co Sdn Bhd and Jayaplus Bakti Sdn
Bhd to acquire 252 acres and 74 acres of land, respectively. - StarBiz

Malaysia delays AIIB membership: Malaysia has delayed its membership to the Asian Infrastructure Investment Bank (AIIB), being part of the remaining seven members yet to sign the bank’s articles of agreement. Fifty out of the 57 prospective founding members signed the agreement at the Great Hall of the People here yesterday. The remaining seven have until end of the year to complete their internal procedures and sign the agreement. - StarBiz

Palm oil price slips as traders wary of Chinese volatility: Malaysian palm oil futures eased on Monday, tracking other vegetable oils lower as cautious traders eyed the negative impacts of a possible default by Greece on its debt repayment. The September palm oil contract on the Bursa Malaysia Derivatives exchange ended down 0.5% at RM2,266 a tonne at the close, after trading in a range of RM2,260 to RM2,277. Palm prices have fallen about 2% so far in June and touched a three-week low last week. - Reuters

Jaks Resources to bid for RM2bil worth of jobs: Construction and property outfit Jaks Resources Bhd will bid for RM2bil worth of jobs in the construction sector for its financial year ending Dec 31, 2015. Chief executive officer Andy Ang said after its AGM yesterday that the company was fairly confident of its prospects, as the economy continues to grow. - StarBiz

Sunway Construction dangles dividend payout: Sunway Construction Group Bhd is hoping to lure investors to its initial public offering with the promise of bigger job wins and a steady dividend payout. The IPO, however, has come at a volatile period for the stock market. - StarBiz

Negative steel outlook continues on China dumping, falling demand:  Falling steel factory utilisation rate worldwide offered little respite for local players as China’s massive production overcapacity continued to swamp the market with cheap exports. According to MIDF Research in a report yesterday, the industry oversupply situation does not seem to abate as steel exports from China continue to rise. - StarBiz

Selling wave sweeps Asia: The worsening Greek debt crisis is haunting the global financial markets again. Asian equity markets succumbed to strong selling yesterday, with China leading the fall. The breakdown of the negotiations between the Greek government and its creditors has left the country on the brink of default and pushed it closer to a possible exit from the eurozone, sending a shock wave across the globe, raising concerns that the debt crisis will cause a liquidity squeeze worldwide. - Edge FD

‘Construction sector is booming’: Despite the gloomy prospects for the global and domestic economies, Tan Sri Jeffrey Cheah, founder and chairman of the Sunway group, sees the local construction sector as “booming”. “The construction sector is booming. The government is pouring in ... RM260 billion over the next five years. It is a good entry point for investors into the construction sector,” Cheah said. - Edge FD

RM8.7bil net foreign outflow for H1 2015: Just as foreign outflow appeared to be receding, heavy selling resumed last week, pushing net foreign outflow for the first half of 2015 to RM8.7 billion, exceeding the RM6.9 billion record- ed for the whole of 2014, according to MIDF Research. - Edge FD

Short-sellers target AirAsia amid accounting worries: Short-sellers are targeting AirAsia Bhd amid accounting worries at Asia’s biggest budget carrier, with its shares among the most borrowed securities in South-East Asia in recent weeks, data showed. Loaned stock in AirAsia rose to a high of 47 million shares on June 23, from seven million two weeks before, according to data from financial software company SunGard Astec Analytics. - Reuters

Acmar’s hotel hits snag: The construction of the much anticipated five-star hotel, Ac- mar Hotel and Residence in Klang, Selangor, has hit regulatory snags and its completion is expected to be delayed by at least three months. Constructed by the Klang-based Acmar International Group, the property developer had initially expected to open the RM350 million hotel to its first customers in November but it has now rescheduled the project to be only completed in the first quarter of next year. - Edge FD

Events calendar

Japan Automobile Manufacturers Association releases vehicle production numbers for May (0400 GMT).

Uk's National Statistics announces the Gross Domestic Product figure for the first quarter (0830 GMT).

The Johnson Redbook Index is released by Redbook Research Inc for June (1255 GMT)

Bank of Japan releases the Tankan large Manufacturing Outlook (2350 GMT)

AGMs/EGMs

Shell Refining Co (F.O.M.) BHD

Time: 10.30am

Venue: Connexion@Nexus, Bangsar South City, Jalan Kerinchi, Kuala Lumpur

Points of interest to be raised: In view of the measures taken towards uplifting cash and affordable spending, will they be sufficient to counter the challenging market environment and the uncertainty of the refining margins? How confident is the board that the company will be able to to get further extension on the maturity of its term loan and the ability to arrange for alternative borrowings?

YNH Pproperty Bhd

Time: 11:45am

Venue: Hotel Sfera (fka Lead View Hotel), Taman Samudera, Sri Manjung, Perak

Points of interest to be raised: Will the board continue to embark on property projects using lease commitments? And what will be the impact on profit margins compared with normal sales? What were the reasons for the hotel and hospitality segment to incur losses for FY2013 and FY2014 and when is it expected to turn around?

Breakfast Briefing , Corporate News

   

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